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Précis - The European Commission has published a series of recommendations regarding private copying and reprography laws in the European Union.

What?

In 2011 the European Commission published its strategy for intellectual property rights, intended to modernise, where necessary, the EU legal framework. That strategy highlighted the importance of cohesion and consistency in relation to private copying levies to encourage the free movement of goods subject to such levies within the Community.

‘Private copying’ refers to the non-commercial copying of sound and audiovisual recordings for personal domestic use. For example, recording a radio or television programme as it is broadcast. Private copying levies (also called private copying compensation) are used as a means of compensating rights owners for royalties ‘lost’ as a result of the exemption from infringement for private acts of copying (in relation to copyright works). Private copying levies are applied to recording equipment and/or media used by individuals for private copying purposes. The UK does not have a private copying levy but such levies are very common in Europe, and elsewhere in the world.

António Vitorino was appointed by the European Commission to explore how the imposition and administration of levies may be harmonised across Europe, as well as the inter-operability (or otherwise) of Member States’ differing systems. Mr Vitorino’s recommendations have now been published (the full text can be accessed by following this link).

The report also makes specific recommendations in relation to the improvement of levy frameworks of Member States in order to ensure a more uniform approach. In short Vitorino recommends:

Collecting levies in cross-border transactions exclusively in the Member State in which the final customer resides. This is intended to ensure a fair and consistent approach between Member States, and also connects the levy to the Member State where the copying is most likely to have taken place.

Shifting the liability to pay levies from the manufacturer or importer level to the retailer level, while at the same time simplifying the levy tariff system, and obliging manufacturers and importers to inform collecting societies about all transactions that concern goods subject to a levy. This aims to reduce currently cumbersome administrative burdens and eliminate the need for retailers to pay for levies prior to selling goods to end users (pre-financing levies in this way is problematic for retailers). It should also prevent the imposition of levies on those who are supplying to professional users.

In the field of reprography, moving towards operator levies rather than hardware-based levies. Vitorino notes that several Member States currently operate a “dual system” comprising hardware-based levies (i.e. a levy applied to the media or equipment used for private copying) and operator levies (usually contractual arrangements between entities undertaking a lot of reprographic copying - such as universities and libraries - and collecting societies). While acknowledging that hardware-based reprography levies could not be entirely replaced by operator levies, Vitorino considers the latter to have a less negative effect on the internal market and therefore to be the preferred method of compensation.

Increasing transparency by making levies visible to final customers. The aim is also to improve retailers’ ability to pass on the cost to their customers.

Defining the “harm” caused to rights owners (by copying done under the private copying/reprography exemptions) more uniformly between Member States to ensure that the process of setting levies is more consistent. The starting point to determine “harm” is (per Vitorino) “the situation which would have occurred had the exception not been in place” and, “[i]n particular…the value that customers attach to the additional copies of lawfully acquired content that they make for their personal use.” However, Member States have differing approaches to determining that value. Some consider that the level of harm is determined by the number of copies made by consumers under the private copying exceptions and that each copy made increases the harm caused. Others consider that the hypothetical licence fee otherwise chargeable decreases with additional copies made and therefore the “harm” calculation is based not on the actual number of copies made but rather the hypothetical (i.e. lower) number of copies that could have been made under licence from the rights holder (in the absence of the private copying exemption). Vitorino emphasises the need for a consistent approach.

A series of proposals linked to the simplification of levy setting mechanisms in Member States. The recommendations focus particularly on strict time limits for setting levies, and the need to ensure that where there are discrepancies between provisional and final levies, these are minimal, and that payment is manageable when retrospective claims are made.

The report also recommends that copies made by end users for private purposes in relation to a service for which the end users are licensed by the right holder are not subject to a levy (on the basis that there is no harm requiring additional compensation).

So what?

Vitorino describes the present divergence between Member States as “a source of friction with the Internal Market principles of the free movement of goods and services.”

It is a friction which has long been examined by the Commission. It has been the subject of several Green Papers as well as various consultations, public hearings and proposals for legislation. More recently, the Monti Report (published May 2010 and prepared at the request of current Commission President J M Barroso) recommended legislation in this area.

The UK’s response for example to a 2004 Commission consultation was that the private copying exemptions under English law are so limited in their nature, scope and application that any prejudice to the rights owner is minimal and therefore no compensation in the form of a levy is necessary. However, the reality is that although the private copying exemptions under English law are indeed very limited, private copying regularly takes place outside those exemptions but it is not cost effective for rights owners to pursue infringers. On that basis, the extent of infringement by private copying outside the limited exemptions arguably would justify the imposition of a levy.

The Commissioner for Internal Market and Services has confirmed that Vitorino’s recommendations will be taken into account in the Digital Single Market process which was launched in December 2012. No doubt they will be debated with much interest on all sides.

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